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Central banks to the rescue?
Good luck with that.
The U.S. Federal Reserve tried to swoop in and save the market panic with a 50-basis-point cut on Tuesday. But lowering rates, even a "concerted" lowering of rates by several central banks working together, in the face of already low rates, isn't going to be economically stimulative.
Central banks lowering rates now is like opening the barn door after the horses have already bolted.
Lower rates aren't going to get consumers out if they're scared to go out – or if they can't go out. They aren't going to induce capital spending by companies if companies don't know where demand will come from or when it will come back.
Besides, the flight-to-quality trading that's driven hundreds of billions of dollars into U.S. Treasuries, for example, has already lowered rates dramatically.
When the coast is clear and the coronavirus is behind us, central banks will have to start pulling back the stimulus they intend to flood economies with. Markets know that's the other side of lowering rates in an eventually passing crisis.
So no, lowering rates isn't going to put a hard and fast support under weak markets.
Markets are looking at economies and sales and revenue and earnings and profits… and now losses. Those economic realities are reflected in stock prices.
About the Author
Shah Gilani boasts a financial pedigree unlike any other. He ran his first hedge fund in 1982 from his seat on the floor of the Chicago Board of Options Exchange. When options on the Standard & Poor's 100 began trading on March 11, 1983, Shah worked in "the pit" as a market maker.
The work he did laid the foundation for what would later become the VIX - to this day one of the most widely used indicators worldwide. After leaving Chicago to run the futures and options division of the British banking giant Lloyd's TSB, Shah moved up to Roosevelt & Cross Inc., an old-line New York boutique firm. There he originated and ran a packaged fixed-income trading desk, and established that company's "listed" and OTC trading desks.
Shah founded a second hedge fund in 1999, which he ran until 2003.
Shah's vast network of contacts includes the biggest players on Wall Street and in international finance. These contacts give him the real story - when others only get what the investment banks want them to see.
Today, as editor of Hyperdrive Portfolio, Shah presents his legion of subscribers with massive profit opportunities that result from paradigm shifts in the way we work, play, and live.
Shah is a frequent guest on CNBC, Forbes, and MarketWatch, and you can catch him every week on Fox Business's Varney & Co.